Tuesday, March 11, 2008

The Rise of Bread.

(click to enlarge)

The above graph is from the BLS and it tracks bread prices. More bad economic news fromThe Boston Globe

:

After nearly two decades of low food inflation, prices for staples such as bread, milk, eggs, and flour are rising sharply, surging in the past year at double-digit rates, according to the Labor Department. Milk prices, for example, increased 26 percent over the year. Egg prices jumped 40 percent.

Escalating food costs could present a greater problem than soaring oil prices for the national economy because the average household spends three times as much for food as for gasoline. Food accounts for about 13 percent of household spending compared with about 4 percent for gas.

This is proof that our economy is in trouble. Some of my favorite economic websites have tried to stay positive during the last several months. But I think that there are simply too many indicators that point to a likely recession (there, I said it). Even if we avoid two quarters of negative growth, there is a real possibility of flat growth, high inflation or stagflation. When gas and grocery prices are rising faster than your paycheck yet the economy is still able to employ you but is not strong enough to enable you to ask for a raise high enough to cover rising inflation costs, we may be in a state of stagflation. Unfortunately, our current government policies are not directed towards sound financial solutions. We may not see an end to our current economic weakness for some time.